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Capital brought in by the proprietor is an example of
- a)Increase in asset and increase in liability.
- b)Increase in liability and decrease in asset
- c)Increase in asset and decrease in liability.
- d)Increase in one asset and decrease in another asset.
Correct answer is option 'A'. Can you explain this answer?
Verified Answer
Capital brought in by the proprietor is an example ofa)Increase in ass...
Explanation
Increase in Asset and Increase in Liability:
- When the proprietor brings in capital, it increases the business's assets as cash or equipment is received.
- At the same time, it also increases the business's liabilities because the capital brought in by the proprietor is considered as a liability to the business since it is owed to the owner.
Increase in Asset and Increase in Liability:
- When the proprietor brings in capital, it increases the business's assets as cash or equipment is received.
- At the same time, it also increases the business's liabilities because the capital brought in by the proprietor is considered as a liability to the business since it is owed to the owner.
Most Upvoted Answer
Capital brought in by the proprietor is an example ofa)Increase in ass...
Increase in Asset and Increase in Liability
When a proprietor brings in capital, it is considered as an investment in the business. This investment increases the assets of the business while also creating a liability to the proprietor. The following points explain why capital brought in by the proprietor is an example of an increase in asset and an increase in liability:
Increase in Asset:
- The capital brought in by the proprietor is a cash injection into the business. This cash is considered an asset of the business as it can be used to purchase other assets such as equipment, inventory or property.
- The cash injection also increases the overall value of the business, which is reflected in the balance sheet as an increase in assets.
Increase in Liability:
- The capital brought in by the proprietor creates a liability to the business as well. The business now owes the proprietor the amount of capital invested.
- This liability is recorded in the balance sheet as an increase in liabilities.
Overall, the capital brought in by the proprietor is an example of an increase in asset and an increase in liability since it increases the value of the business while also creating a debt to the proprietor.
When a proprietor brings in capital, it is considered as an investment in the business. This investment increases the assets of the business while also creating a liability to the proprietor. The following points explain why capital brought in by the proprietor is an example of an increase in asset and an increase in liability:
Increase in Asset:
- The capital brought in by the proprietor is a cash injection into the business. This cash is considered an asset of the business as it can be used to purchase other assets such as equipment, inventory or property.
- The cash injection also increases the overall value of the business, which is reflected in the balance sheet as an increase in assets.
Increase in Liability:
- The capital brought in by the proprietor creates a liability to the business as well. The business now owes the proprietor the amount of capital invested.
- This liability is recorded in the balance sheet as an increase in liabilities.
Overall, the capital brought in by the proprietor is an example of an increase in asset and an increase in liability since it increases the value of the business while also creating a debt to the proprietor.
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Capital brought in by the proprietor is an example ofa)Increase in ass...
The Correct Answer is "A" because :
1. When a proprietor (Owner of the Business) brings Capital (money) into the Business. It increases the asset (From Business point of view)..
2. But at the same time, now the Business has a liability i.e Business have to re-pay the amount to the proprietor which he brought in the beginning as Capital.
3. In short, you might have heard that "A Company is separate entity from its members, owner etc." because of which we (company) considers the "bringing of capital by the proprietor as an increase in asset and increase in liability"
1. When a proprietor (Owner of the Business) brings Capital (money) into the Business. It increases the asset (From Business point of view)..
2. But at the same time, now the Business has a liability i.e Business have to re-pay the amount to the proprietor which he brought in the beginning as Capital.
3. In short, you might have heard that "A Company is separate entity from its members, owner etc." because of which we (company) considers the "bringing of capital by the proprietor as an increase in asset and increase in liability"
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